Ethiopia's $5bn project that could turn it into Africa's water powerhouse

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Photos:Africa's big infrastructure projects

Grand Renaissance Dam, Ethiopia – The Grand Renaissance Dam is under construction on the Blue Nile River in Ethiopia. It is claimed it will generate 6,000 MW of energy when completed.

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Photos:Africa's big infrastructure projects

West African railway – West African and mining companies in the region are investing in a massive rail project which, when completed, will be 3,000 km long and link Benin, Burkina Faso, Niger, Ivory Coast, Ghana, Nigeria and Togo.

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Photos:Africa's big infrastructure projects

Mombasa-Kigali railway – Stretching almost 3,000 kilometers and connecting three East African states, the Mombasa-Kigali railway will pass through Kampala, Uganda.

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Photos:Africa's big infrastructure projects

Konza Techno City, Kenya – Konza Techno City will be built over 5,000 acres of land, 64km south of Nairobi. The business park is being marketed by the Kenyan government as part of the Kenya Vision 2030 development program.

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Konza Techno City, Kenya – The establishment of Konza City is one of the key flagships projects of Vision 2030 which will position Kenya as the regions ICT hub, according to the government.

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Photos:Africa's big infrastructure projects

Djibouti Railway, Ethiopia – As part of the Ethiopian government's Growth and Transformation plan, a 650-kilometer railway will be built to link up the Ethiopian capital of Addis Ababa and the Port of Doraleh in Djibouti.

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Photos:Africa's big infrastructure projects

Djibouti Railway, Ethiopia – The project is set to cost $1.2 billion, according to estimates from KPMG.

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Grand Inga Dam, DR Congo – The Grand Inga dam is a planned hydroelectric dam on the Congo River at Inga Falls. The project is expected to cost more than $80 billion in total.

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Jasper Project, South Africa – Renewable solar energy firm SolarReserve has 238MW of solar projects in construction in South Africa, including the Google-backed Jasper Power Project (pictured here).

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Story highlights

Ethiopia is building the largest hydro-electric dam in Africa

The country says the $5bn Grand Renaissance Dam is funded entirely by the government and its people

Neighboring Sudan and Egypt fear that the dam will affect their water supply

Each week, Africa View explores the trends, figures and initiatives shaping Africa. From education and energy to technology and innovation, it showcases topics and influential sectors driving countries on the continent.

(CNN)It's called the Grand Renaissance Dam -- and the clue is in the name.

With some 8,500 laborers working around the clock on its construction, the imposingly-named dam is surely one of Africa's most ambitious infrastructure projects, reaffirming Ethiopia's ambitions of becoming a big regional player and a major exporter of power.

When completed, the project will generate around 6,000 megawatts of electricity for both domestic use and exports.

The most striking aspect of the nearly $5 billion enterprise is, however, that it is entirely funded by Ethiopia, without any foreign investment. According to the authorities, 20% of the project is financed from bond offerings to Ethiopians, and the remaining 80% from tax collection.

Without electricity there won't be industrialization in Africa.

Zemedeneh Negatu

"It was seen as a strategically important initiative that the government and the Ethiopian people are financing it 100%," says Zemedeneh Negatu, managing partner at Ernst & Young Ethiopia.

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"They have come up with a very creative and innovative way that I think will be a lesson for other African countries who want to embark on such large infrastructure projects, and want to have the flexibility to do it themselves," he adds.

Hydroelectric powerhouse

So far, Ethiopians at home and abroad have contributed about $350 million, and the government says that the 170 meter tall dam is on track for a 2017 opening, with 40% of the work already complete.

Ethiopia's per capita income might be one of the lowest in the world, but the country has enjoyed an impressive economic growth since 2000, averaging 10.9% annually, which has resulted in a 33% reduction of people living in poverty.

If the Grand Renaissance Dam and other hydroelectric projects, such as the Gibe III dam on the Omo river, are completed on time, The World Bank estimates Ethiopia could earn $1 billion a year from electricity exports. Negatu says that this would make the country the largest exporter of power in Africa, and second only to South Africa when it comes to installed capacity.

Unhappy neighbors

Yet, not everyone is happy about Ethiopia's energetic drive to harness its water resources. The Grand Renaissance Dam is being built on Blue Nile, a tributary of the Nile River which has been powering the agriculture of Sudan and Egypt -- through which it flows -- for millennia. These countries have opposed the project in the past, fearing that the dam will reduce their share of the Nile water. The ousted Egyptian president Mohamed Morsi had even threatened to defend "each drop of Nile water with our blood if necessary" back in 2013.

Passions have been calmer more recently, and today the Reuters news agency reported that representatives of Egypt, Sudan and Ethiopia reached a preliminary agreement in Khartoum on how to operate the dam. Negatu is convinced that a compromise will be reached, as he thinks that the dam will ultimately benefit not just Ethiopia but most other East African nations.

It's Africa's Achilles' heel. With anyone who wants to build a factory in Africa, the first thing they ask is infrastructure, and within infrastructure, whether there is sufficient electricity.

Zemedeneh Negatu

"This is actually a regional project because up from Egypt all the way down to Rwanda, countries are going to buy the power that's generated by this dam," Negatu says, adding that both Rwanda and Kenya have already agreed to purchase thousands of megawatts once the project is finished.

A lack of reliable power has long stunted Africa's development, with 600 million people on the continent not connected to the grid and getting by on a mix of generators, kerosene lamps and candles. In Ethiopia, only 15 to 20% of the population has access to power according to a study by Chatham House.

"It's Africa's Achilles' heel," says Negatu. "With anyone who wants to build a factory in Africa, the first thing they ask is infrastructure, and within infrastructure, whether there is sufficient electricity. Industrialization has always been about electricity, and this [dam] addresses this basic need."

He adds that, after depending on exporting raw commodities for decades, governments across Africa should be pursuing a strategy of industrialization, following the example of China.

"We've got to move up the value chain, and it's what Ethiopia is doing right now. Its strategy is industrial-based -- not to export commodities but to manufacture value-added things, and other African nations are trying to emulate that. But without electricity there won't be industrialization in Africa."